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Dec 11, 2018 1:29 AM UTC
Solved

Am I entering Owner's Draw correctly?

I'm a sole member LLC.

I've got an "Owner's Equity" equity account set up and any time I Take money from my pocket and spend it on the company, I log it in this account and categorize it properly for tracking purposes.  

When I want to take money from the company, I created an "Owner Draw" equity account.  Do I write myself a check and use the "Owner Draw" account?  I noticed that if I do that, the draw account goes into a negative balance.  I feel like I should not have created a draw account and instead, wrote a check against the "Owner's Equity" account.

Which is correct?


Thanks!

Dec 11, 2018 1:29 AM UTC

Yes use your draw account, look at the sample company files and see how these are setup.

29 replies

Dec 11, 2018 1:29 AM UTC

Yes use your draw account, look at the sample company files and see how these are setup.

Dec 11, 2018 1:30 AM UTC
so a negative balance is ok for the draw account?
Dec 11, 2018 1:30 AM UTC

Yes, the draw account will be negative, this is a record of funds taken from the business.

Dec 11, 2018 1:30 AM UTC
Will this negative draw called "Owners Draw" as an equity account carry balances from year to year?  I currently see the amount I drew last year and this year to date.
Aug 9, 2023 6:36 AM UTC

Owners draw is a contra equity account so it tracks the reductions to equity due to owners taking out and devaluing company equity.